Document Type

Article

Comments

Forthcoming in New Palgrave Dictionary of Economics, 2nd edition.

Abstract

Optimal taxation concerns how various forms of taxation should be designed to maximize social welfare. The task requires an integrated consideration of the revenue-raising and distributive objectives of taxation. The central instrument in developed economies is thelabor income tax, the analysis of which was pioneered by Mirrlees (1971). Subsequently, Atkinson and Stiglitz (1976) showed how commodity taxes should be set in the presence of an optimal income tax, the results differing qualitatively from, and in important respects displacing, the teachings derived from Ramsey’s (1927) seminal analysis of the pure commodity taxproblem.

Date of Authorship for this Version

January 2008